June 4, 2007

Hillary was Right; The health care plan that dare not speak itsname.

More than a dozen years later, Hillary Clinton wants the world toknow that she has seen the error of her ways. That health careplan--the one that was supposed to revolutionize the medicalindustry and guarantee every American insurance--wasn't such a hotidea after all. "I think that both the process and the plan wereflawed," Clinton admitted in an interview with The New York Times,demonstrating a level of contrition more fitting for an Iraq wararchitect. "We were trying to do something that was very hard to do,and we made a lot of mistakes."

A lot of people will hear that and nod in agreement. With healthcare reform emerging as a top issue for the 2008 presidentialcampaign, probably no politician is more identified with botchingit than Senator Clinton. Across the political spectrum,"Hillarycare" has become shorthand for policy overreach andliberalism run amok. "It was too big, too complex, too government,"former House Speaker Newt Gingrich recently said. Democrats havebeen critical, too: "It was probably too dogmatic," Tony Coelho,the strategist and former representative, told National Journal. It"had to be X, Y, and Z." Given Hillary's enormous role in shapingthat plan, as an adviser to her husband and leader of his infamous1993 health care task force, trying to defend it today might wellamount to campaign suicide. That, undoubtedly, helps explain whyClinton has joined the critics, sticking it to herself not onlyduring interviews but also at public events, such as a gathering ofthe American Medical Association last year. "Let's retire the olddebates," she said to her one-time adversaries. "They haven'tserved our country well."

And maybe she has a point. After all, there's a pretty good case tobe made that the Clinton administration as a whole--and SenatorClinton in particular-- did make some egregious strategic errors,particularly when it came to selling the plan to Congress. If we'resupposed to judge Clinton based on her decisions in 1993 and 1994,then it's good to know whether her political judgment wassound--not to mention what lessons she may have drawn from theexperience.

But an equally important question, certainly, is the one nobody isasking: Just how well would the Clinton health care plan actuallyhave worked? Would we have been better off under Hillarycare?Here's one good hint: Twelve years later, we're back talking aboutthe very same problems, and even some of the very same solutions,all over again.

Hillarycare wasn't always a dirty word. People forget, but there wasactually a time, not so long ago, when the Clinton health care planwas wildly popular and Hillary was considered a hero for her rolein shaping it. It was September 1993--right after Bill Clintonformally introduced the plan in a nationally televised address andHillary Clinton went before several congressional committees todefend it. By that time, everyone agreed the nation had a healthcare crisis on its hands: About 15 percent of the Americanpopulation had no health insurance, and employers--who hadhistorically provided private insurance to most of the U.S.workforce--were becoming increasingly reluctant to offer coverage.The big question was what, exactly, to do about it.

To the disappointment of the left, the Clinton campaign had, in1992, rejected calls to create a true single-payer system--in whichthe government would insure everybody directly, as it now doesthrough Medicare for the elderly (and through which many foreigngovernments cover all of their citizens). It did so out ofdeference to American political sensibilities, which traditionallyfrowned on too much government, and in keeping with its genuinelycentrist instincts. As Hillary would later explain in hercongressional testimony, "If you build on the employer/employeesystem, you are already building on what is available and familiarto most Americans." At the same time, the campaign had indicatedthat simply giving coverage to everybody-- a relatively simpletask, depending on how you did it--was actually not enough.Somehow, the Clinton team had to come up with a way to make medicalcare less expensive, because it was the rising costs that madehealth insurance so unaffordable and would, eventually, bankruptnot just many individuals but the country as a whole.

Late in the presidential campaign, Clinton had embraced a model ofreform known by the clunky moniker "managed competition." Itspremise was that it made sense to rely on private insurance as theprimary source of coverage for working Americans, just as hadalways been the case in this country. But, in order to makecoverage affordable to everybody, government had to restructure theinsurance business. Regardless of income and medical condition,every single American needed to be able to choose from a menu ofprivate plans, the way employees of large businesses generally did.If this happened, the theory went, a true market for healthinsurance would exist--and the competition to attract customerswould force insurers to find ways of providing more cost- effectivecoverage. This would ultimately lead to better medical care andlower premiums, freeing up resources that could then be used--amongother things--to extend insurance to people who didn't have italready.

It was an ambitious notion, certainly, and it promised to deliver alot of what the left had always wanted--most importantly, trulyuniversal coverage with government guaranteeing relatively generousbenefits for all. It also involved closely regulating the insuranceindustry, to make sure that insurers would make coverage availableto everybody. But, in its broad designs at least, managedcompetition was still not a particularly radical scheme. The ideaactually traced its lineage back to discussions by health careindustry leaders convened by a physician named Paul Ellwood, whohad once advised Richard Nixon, and an economist named AlainEnthoven, who had worked in the Pentagon during the Vietnam war.And, in 1993--as Hillary's task force filled in the plan's numerousdetails--the business community's interests continued to get plentyof attention. Hillarycare would require all businesses tocontribute something to their employees' insurance, but thatcontribution would be more predictable than directly paying forinsurance premiums, which could vary wildly from year to year.While small businesses--many of which still didn't provide theirworkers with coverage--might have a harder time meeting the newobligation, the plan promised these companies special subsidies.

All of this did make for a pretty complicated schematic--at leastbehind the scenes. That's why the final proposal weighed in at ahefty 1,300 pages and critics were later able to lampoon it bydiagramming it on poster-board charts. But, from the standpoint ofthe average American, the Clinton plan actually promised to work ina remarkably straightforward way. Once a year, the government wouldpresent people with a choice of private plans. All the plans wouldhave generous benefits, covering even services like mental healththat private coverage had traditionally given short shrift. Theplans would vary in cost, depending in part on the level offinancial protection they provided, with the government coveringnearly the full price of the cheapest plan and individuals chippingin extra for the pricier alternatives. But all the plans would beaffordable. The government would prohibit the plans fromdiscriminating against people based on their medical condition: Aninsurer couldn't charge you higher premiums, or reject yououtright, just because you had, say, diabetes. Most important,coverage would become a birthright. Everybody would get insurancefrom day one. And it would never get taken away.

Presented this way, the plan was awfully appealing, as an early pollin the Los Angeles Times showed: After listening to the presidentexplain the plan in his speech, Americans said they supported it bya two-to-one margin. And, when Hillary toured Capitol Hill topromote the program, even some Republicans gushed over herhandiwork--not to mention her obvious mastery of the subject. "I,for one, personally admire you," Senator Orrin Hatch told her.

But not everybody was so impressed. In late 1993, the HealthInsurance Association of America--a trade group representing smallinsurers--introduced TV viewers to Harry and Louise. The fictionalmiddle-class couple spent a great deal of time sitting at theirkitchen table, flipping through a printed copy of the Clintonhealth plan and furrowing their brows as they stumbled across whatthey considered troubling details. One of Harry and Louise'scomplaints was that the Clinton plan would make almost everybodypurchase insurance through giant purchasing cooperatives called"alliances." But the alliances were what allowed managedcompetition to work--they let individuals, small businesses, andthe uninsured band together and get the kind of group pricing anddiscounts that large employers always had.

The following February, life imitated art when Elizabeth McCaughey,a very real scholar at the conservative Manhattan Institute,decided to tell the world about the myriad flaws of the Clintonplan by writing a screed for a political magazine. (As it happens,it's the one you are holding in your hands.) McCaughey, for herpart, was shocked to discover that the Clinton plan called forcovering only services deemed "necessary" and "appropriate." But, asThe Atlantic's James Fallows would later note in a devastatingrejoinder, every insurance program in the world had such a clause.The Clinton plan, at least, left decisions over what those termsmeant in the hands of a democratically accountable National HealthBoard, as opposed to secret discussions held within the offices ofinsurance companies.

Harry, Louise, and McCaughey also worried a lot about big, badmanaged care, fretting that the Clinton plan would force everybodyinto cheap health maintenance organizations (HMOs), whichrestricted choice of doctors and access to treatments. "Havingchoices we don't like is no choice at all," Louise explained in onespot. The germ of truth here was that the Clinton plan really didhave incentives for people to choose HMOs, since those would likelybe the cheapest options in most cases. But study after study hadshown that the best HMOs provided superb medical care--better, infact, than more traditional fee- for-service insurance. (They weremore integrated and generally did a better job of emphasizingpreventative care.) Besides, the Clinton plan wouldn't actuallyforce people into managed care. Indeed, at a time when manycompanies were doing precisely that--by choosing HMOs for theirworkers without giving them alternatives--the Clinton plan proposedto guarantee every American access to at least one old-fashionedplan that didn't limit choice of doctor. These more traditionalplans would be more expensive, to be sure, but the option wouldalways be there for people willing to pay that extra premium.

Still, not every objection was as unfounded as McCaughey's--or astransparently self-serving as Harry and Louise's, who were createdby an industry (small insurers) whose standard business practices(avoiding sick people) the Clinton plan sought to make illegal. Adifferent set of concerns came from more thoughtful experts likeEllwood and Enthoven, the fathers of managed competition. Ofparticular concern to them was a limit on how much insurers couldraise premiums from year to year. Government was in no position toset such limits, the argument went, because it couldn't determine aswell as the market what the proper level of medical spendingwas--or how to allocate it. If, for example, the cap was too low,doctors and hospitals wouldn't get the money they needed--and wouldbegin cutting back on services.

From a policy standpoint, these caps were indeed the plan's mostcontroversial element--and the ones about which questions could mostlegitimately be raised. But, looking back, even these concerns wereprobably overblown. The task force had included this cap partly tosatisfy the Congressional Budget Office (CBO), which, in itsofficial estimates of the program's cost, wouldn't assume thathaving a bunch of insurance plans was likely to save money, as theClintons insisted it would. Since CBO's projections would guide thedebate, and since political moderates were likely to abandon theplan if it threatened to raise deficit spending or spark new taxes,the task force threw in the cap. But it was entirely possiblepremiums would not have exceeded the caps, at least not for awhile: In fact, over the next few years, premium increases stayedunder the limits set by the caps. And that was without a lot of theadministrative savings that Hillarycare would have generated. Don'tforget, too, that Congress always had the power to ease the caps ifthey really threatened to disrupt medical services--although thehope was always that limiting spending would ultimately push thehealth care system to be even more efficient.

As we all now know, those objections ended up carrying the day. Thefear of rationing played directly into public fears of governmentincompetence--a fear the press did little to dispel. Harry andLouise and McCaughey may have been talking nonsense, but theyspooked a lot of Americans. And, even though many interest groupsstood to benefit from the Clinton plan--chief among them, largeemployers already paying for generous worker benefits--few lifted afinger to help. The plan died, and, just like that, Hillary wentfrom savior to scapegoat.

But look at everything that has happened since that time. By the endof the '90s, virtually every American was enrolled in an HMO orsome other type of managed-care plan--in other words, precisely thescenario that Harry and Louise, along with McCaughey, had warnedwould happen if the Clintons got their way. But managed care hadevolved in a rather different direction than it might have underHillarycare. The Clinton plan had proposed to regulate HMOs closely.Not only would the standard benefit package limit the ability ofinsurers to skimp on necessary care for people who needed it, butthe Clinton plan also would have required all insurance plans tocollect and publish data about how well their beneficiaries weredoing (like, for example, whether they all got recommended tests,how satisfied they were with the service, and so on). This wouldhave bolstered the best managed care organizations, the nonprofitgroup practices (like Group Health of Puget Sound in Seattle orHarvard Community Health in Boston, both of which had excellentreputations in the '90s) that really did promote high-qualitymedicine. There was even a patients' bill of rights, to make surethat people who thought their insurers had denied treatmentsimproperly could appeal such decisions in a binding legal process.

It was these sorts of provisions, which took pages to describe, thatmade the Clinton plan such an object of derision. And yet, in theabsence of such rules, the "good" HMOs never stood a chance.For-profit insurers gobbled up the market, and, in response todemands by employers to deliver cheaper insurance, they paid verylittle attention to quality of care. Horror stories about impropertreatment denials and interference in the clinical processproliferated. Studies showed that insurers were routinely usingmedical treatment guidelines that many doctors consideredsubstandard. By the late '90s, the public was clamoring for apatients' bill of rights--which, had it passed, would have lookedmuch like the one Hillary had thought to include in the firstplace.

The HMO reform debate eventually subsided in the face of some morepressing concerns, such as the lack of prescription coverage forMedicare recipients-- who were, as of a few years ago, desperatelystruggling to pay for their drugs. But the Clinton plan hadanticipated that issue, too: As part of its effort to modernize theentire health care system, it would have added a prescription- drugbenefit to Medicare. And it would have had the government administerthat benefit directly, as it does for the rest of Medicare. (Bycontrast, the existing drug benefit--which the Bush administrationand the Republicans created in 2003--uses private insurers asintermediaries. That costs more money, since private insurersrequire extra subsidies to stay with the program, and it doesn'tapply as much bargaining leverage to the pharmaceutical companies.)

Lately, every day seems to bring word about some new employerstruggling with the costs of their employees' health insurance; ifit's not the automakers, it's the airlines or thetelecommunications industry. It's hurting American competitiveness;in one celebrated case a few years ago, Toyota cited high,unpredictable health care costs here as a reason to locate a newplant in Canada instead. And it's poisoning labor-managementrelations. In 2004, California grocery workers walked out for fourmonths because their employers-- fearful that Wal-Mart, with itsfamously meager benefits, was coming into the area--werethreatening to offer lower health benefits. Now both the union andthe grocers say they support a universal health care system that,even if it requires some employer contribution, would at leastcreate a level playing field and began to restrain rising costs,which have started climbing again almost as quickly as they werebefore. In other words, they support doing exactly what the Clintonhealth care plan would have done.

And, of course, today some 45 million Americans have no healthinsurance--or nearly 16 percent of the population, which is aboutone point higher than the figure was when Hillary and her taskforce got to work. You can say a lot of things about the plan thatprocess produced: that it was complicated to explain, that it wasbotched politically, and that, above all, it was hardly perfect.(Some of us still think a true single-payer system would workbetter.) But, if Hillarycare accomplished absolutely nothing else,it would have made certain every American had access to affordablehealth care--sparing millions of people physical harm, financialcalamity, and countless indignities. For a plan that was supposedlysuch a debacle, that would have been an awfully mightyaccomplishment.

You won't hear anybody in U.S. politics admit as much right now. InWashington, at least, praising Hillarycare will get you laughed offthe talk shows. But the rising anxiety about affordable medicalcare, combined with the worries about health care's effect on theeconomy, have launched yet another serious debate about health carereform-- the first since the early '90s. And, if you look closelyat the proposals experts and officials are tossing around, you maystart to recognize some familiar elements. With the exception oftrue single-payer plans, virtually every idea for universalcoverage now on the political agenda envisions creating a system inwhich, like Hillarycare, people will shop around for private healthplans. They also envision, as did Hillarycare, a government role inmaking sure affordable, high-quality plans are madeavailable--typically, by creating (again, like Hillarycare) somesort of purchasing cooperative through which some, if not all, ofthe population would buy their coverage. That's true of the planformer Senator John Edwards proposed as part of his presidentialcampaign a few months ago. It's true of the plan Senator Ron Wydenintroduced to Congress back in December. It's even true of the planformer Massachusetts Governor Mitt Romney signed into law beforeleaving office last year--even though Romney has made mockingHillarycare a staple of his campaign rhetoric as he seeks theRepublican presidential nomination.

Still, while just about every reformer has borrowed elements of theold Clinton health plan, none of the leading presidentialcontenders has yet proposed something as comprehensive andfar-reaching--aware, no doubt, that trying to do so much so quicklymay be more than the political system will tolerate. For the mostpart, the serious reformers concentrate on getting coverage toeverybody--leaving more wholesale reorganizations of the healthcare system, the kind that might yield serious cost savings, untillater.

What remains to be seen, though, is whether Hillary herself can takeeven that more modest step. No candidate in the presidential raceknows more about health care than she does. No candidate has astronger, more proven record of fighting to expand coverage. And,yet, no candidate has to act with the caution that she does.Achieving universal health care will probably require theleadership of somebody who can push public opinion--and it's notclear that she can do so, at least, not as long as Hillarycare'sreputation remains what it is. It's a shame, really, because ifthere were any justice, she'd have the best one-liner on healthcare of any candidate out there: "I was right the first time."